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Executive Office for Administration and Finance 



Policy Brief Series 

No. 7. March 23. 2000 



Public Construction Reform in Massachusetts 



Argeo Paul Cellucci 

GOVERNOR 

Jane Swift 

Lieutenant Governor 



UMASS/AMHERST 





312Qbb DE71 ESST 3 



Andrew S. Natsios 

GOVERNMENT BScUMEN 
COLLECTION 



rs 



Executive Summary 



OCT 2 ? 2000 



Since 1998, the executive branch has 
implemented wide-ranging administrative 
reforms to construction procurement and 
management in the Commonwealth. However, 
there are limits to reform without legislative 
changes, particularly in the area of alternative 
construction methods. In the administration's 
comprehensive review of construction 
procurement and management practices, the 
importance of being able to take a flexible 
approach to construction procurement and 
delivery emerged repeatedly. 1 The federal 
government has been using alternative 
construction methods for as long as a decade, 
other states have passed legislation authorizing 
these methods, and research has proven their 
effectiveness in cost and time savings. 

♦ Construction reform is important because 
the Commonwealth spends over $3 billion 
annually on public construction, and the 
demand for capital investment far exceeds 
this amount. Alternative construction 
methods provide one way to stretch these 
capital dollars farther. 

♦ An independent study found that 
Massachusetts could save at least $220 
million a year by using alternative 
construction methods. To put this amount 
in perspective, the Division of Capital Asset 
Management and Maintenance spends 
approximately $200 million annually on 
capital projects, and the Department of 
Education's School Building Assistance 
Program spends approximately $275 million 
annually in school construction and/or 
renovation. 

♦ The Commonwealth of Massachusetts is one 
of only five states that does not have the 
ability to use design/build, one of the most 



Construction Reform Task Force Report, May 29, 
1998 



University of Mass; 

well-known alternative • A cpnsjrud 
methods, without special fegismfion. ^P/ 



Without construction reform, the 

Commonwealth misses opportunities to improve 
its performance as one of the largest asset and 
land owner/managers in Massachusetts by not 
taking advantage of updates in best practices and 
technology. 

♦ Roads and bridges that could be built or 
repaired more quickly and less expensively 
mean less time waiting in congested traffic 
and more money for other projects. 

♦ Courthouses and prisons that can be 
constructed using design and construction 
techniques that fit the process to the project 
make it possible for the Commonwealth to 
save time and money and improve quality. 

♦ Modernizing procedures and techniques 
makes it easier for state staff to be 
aggressive contract managers, and at the 
same time, makes it possible for the 
Commonwealth to improve the quality of its 
relationships with its partners and vendors. 

Most public construction laws have not been 
changed for nearly 20 years, since the Ward 
Commission issued its recommendations to curb 
corruption in building design. Yet there is no 
evidence in other states that the use of alternative 
construction methods leads to corruption. 3 

This policy brief focuses on the justification for 
using alternative construction methods and 
provides an update on selected elements of the 
administration's Construction Reform initiative. 

Rosemarie Day and Rosemarie Bonaventura at 
the Executive Office for Administration and 
Finance prepared this policy brief. 

2 Survey conducted by Design Build Institute of 
America, 1996 

3 Conversation with Douglas Gransberg, September, 
1999. 




Executive Office for Administration and Finance 



Policy Brief Series 

No. 7. March 23. 2000 



"Massachusetts has the dubious distinction of having the most regulated public construction 
contracting process in the country. Massachusetts statutes override the normal rules of law 
governing private contracting in the area of public bidding and in many important aspects of the 
performance of public contracts, as well as the fiscal aspects of contracts with state 
instrumentalities and municipalities. " 



Construction Reform Legislation (H. 4288) 

On April 27, 1999, Governor Cellucci and Lt. Governor Swift filed legislation that would 
significantly improve the Commonwealth's public construction operations. This legislation 
embodies the recommendations of the Construction Reform Advisory Board made up of state, 
industry professionals, professional trade organizations, and representation from the cities and 
towns. The reforms proposed in this bill would update existing laws and give state agencies, 
public authorities, and municipalities the tools to bring the Commonwealth into the new 
millennium, without sacrificing the important safeguards that keep public construction honest, 
open, and competitive. These reforms would result in substantial cost and time savings, and 
improve the quality of public infrastructure in the Commonwealth. 

Alternative Delivery Methods 

One of the biggest reform measures included in this legislation will permit the Commonwealth's 
large public construction agencies 5 to use proven alternative delivery methods of construction 
such as design/build, turnkey, construction manager at risk, and build/operate/transfer, when 
appropriate. Traditional construction follows a design-bid-build process which keeps the 
designer's work separate from the constructor's work; alternative methods collapse these steps to 
save time and money, improve quality, or change incentives for long-term maintenance. 

In selecting the appropriate delivery method for a project, the following variables must be 
considered: project drivers and the experience of the organization procuring the construction. 
Project drivers are the most important aspects for decision-makers to consider in a project, 
typically time, money, and quality. 



Construction 
Method 


Definition 


Project 
Driver 


Design-Bid- 
Build 


Each step of design, construction must be completed before beginning 
the next step. Easy to manage, but time consuming. Does not allow for 
contractor input early in project. 


Money 


Design/Build* 


Allows construction to begin before the final design is complete. 
Expedites delivery by allowing design and construction to overlap and 
increases designer/contractor relationship. 


Time 


Multiple General 
Contractors 


Project is designed to completion in distinct stages, bid and built 
separately using different general contractors. Expedites delivery by 
allowing initial phases of project to begin, while subsequent phases are 
being designed. 


Time 
Money 


Construction 
Manager 


One contractor entity gives the owner advice early in the project and 
helps coordinate the management and oversight of the project. The 
owner only has to deal with one contractually responsible entity 
throughout the project. 


Quality 
Time 



4 James J. Meyer, Christopher L. Noble, and Penny P. Cobey, Construction Law , 1997. 

5 The Division of Capital Asset Management and Maintenance (DCAMM), Massachusetts Highway Department 
(MHD), Massachusetts Turnpike Authority, Massport, Massachusetts Water Resources Authority (MWRA), the 
Massachusetts State College Building Authority (MSCBA), the University of Massachusetts Building Authority, 
Massachusetts Development and Finance Agency, and Massachusetts Bay Transportation Authority (MBTA). 




Executive Office for Administration and Finance 



Policy Brief Seriei 

No. 7. M'arch 23. 200C 



Construction 
Method (cont) 


Definition 


Project 
Driver 


Construction 

Manager-at- 

Risk* 


Same as Construction Manager with additional managerial and financial 
responsibility. 


Time 
Quality 


Build-Operate- 
Transfer* 


One entity is in charge of design, construction, long-term financing, and 
temporary operation of the project. The operation of the project is 
transferred to owner at the end of a defined operation period. 


Time 

Money 
Quality 
Maintenance 


Turnkey* 


One entity performs the design, construction, and short-term financing of 
the project. Payment is made at the completion of the project. 


Time 

Money 



♦Requires special legislation. Included in the Construction Reform legislation (H.4288). 
Alternative Procurement Methods 

To address the shortcomings of the current low bid procurement process, the Construction 
Reform legislation authorizes alternative procurement methods, such as "best value" procurement 
and A+B bidding (which are applicable to the construction methods listed in previous chart), for 
the Commonwealth's large construction agencies. 

"Best value" procurement is currently in use by the federal government for all procurements 
(goods, services, and construction) and in the Commonwealth for the purchase of goods and 
services, but not in construction. Best value procurement allows agencies to consider factors in 
addition to price when making a selection. For example, an agency could give weight to the 
experience of the contractor when specialized expertise is required for a project (such as with 
historic preservation work). The goal is to get the best quality available for a reasonable cost. 

Another proven procurement method that the Construction Reform legislation would authorize is 
A+B bidding, currently used by several states' highway departments. A+B bidding allows the 
procuring agency to weight price (A) and time (B) as factors in making the selection. Time is 
given a dollar value, based on an analysis of the inconvenience to the motoring public. 

Why use alternative methods? 



1. Time is money... 

The Commonwealth's sequential construction process takes longer than other acceptable 
delivery methods and is ultimately more expensive for taxpayers. For example, bridge 
rehabilitation has farther reaching cost implications than the job's price tag. Disruption to 
businesses on both sides of the bridge results in lost revenue for those businesses and 
forfeited tax revenue for the state. Indirect costs mount over time in inconvenience to 
citizens and project overhead. 

Fast-track delivery methods, such as design/build, can take care of this problem. 
Design/build has been authorized for specific projects, such as the Reggie Lewis Track at 
Roxbury Community College, which saved at least 6 months in construction. The facility 
was made available to students sooner than under the traditional construction method. 




Executive Office for Administration and Finance 



2. Bridging the gap. . . 

During any given project, the Commonwealth hires multiple designers, contractors and 
subcontractors at different stages of the process. These companies may have very different 
ways of approaching a job and disagreements can arise. These disputes cause delays and 
inevitably cost the Commonwealth money. By employing a method, such as design/build, 
which allows designers and contractors to work together earlier in the project, some of these 
disputes could be resolved before the first shovel hits the ground. 

3. When given the chance. . . 

The Commonwealth has demonstrated that when it breaks free from its traditional 
construction procurement process, it can do more in less time and for less money. A special 
provision in the General Laws has allowed DCAMM to use a "two step" quality and price- 
based procurement process for modular construction. This method was used to procure the 
contractor for the recently completed MCI Shirley project, which was completed on budget 
and in record time. 

4. The Commonwealth shouldn 't be penny-wise and pound-foolish . . . 

Low bid selection doesn't always bring the best value when projects are complex, such as 
historic preservation. And, long-range operating costs should be considered when making 
design and construction decisions. Special legislation is allowing for the accurate restoration 
of historic buildings such as the McKim building in the Boston Public Library and the 
preservation of the exterior of the State House. 

5. The Commonwealth needs to target its efforts to get the best quality for available resources. . . 

Most of the time, it is possible to save money during design, so it is important to get 
constructability advice before the design process is complete. Also, there is little room for 
innovation in the project methods when the procurement process does not allow designers 
and general contractors to collaborate. 

Other States 

Research findings have proven that other states employing alternative construction methods have 
experienced significantly reduced construction costs and delays compared to Massachusetts. 



The tables below summarize the results from a study recently conducted by Pioneer Institute, 
"The Cost of Inaction: Does Massachusetts Need Public Construction Reform?" The author of 
this study, Douglas Gransberg, compares the performance of the Massachusetts building and road 
construction projects to the performance of building and road projects in Indiana, Florida and 
Texas with respect to project cost and schedule. Of these four states, Massachusetts fares the 
poorest in every category. The study concludes that Massachusetts misses the opportunity to save 
over $200 million of its $3 billion in annual spending on construction. The Commonwealth 
could use these savings to complete more capital projects with its current resources. 





Massachusetts 


Indiana 


Texas 


Florida 


Average Cost Growth 6 


11.27% 


1.41% 


3.68% 


9.99% 


Average Time Growth 7 


55.2% 


6.0% 


11.6% 


16.90% 


Cost per Square Foot 8 


$202.00 


$142.00 


$127.00 


$128.00 



6 Cost growth measures the increase of a construction contract amount from its award price to the total final price. 

7 Time growth measures the increase or decrease in a contract's life, the difference between the scheduled date of the 
contract's completion and the final date of the contract's completion from the date that the feasibility study of the 
project was awarded. 

Cost per square foot figures are normalized. 




Executive Office for Administration and Finance 



Pioneer Institute has recently released further data that compares cost and time growth 
exclusively for building projects in Massachusetts, Florida and Texas. Unlike road construction 
in Massachusetts, building construction requires every project to complete a two-step 
study/design process 9 and to file sub-bids. 10 





Massachusetts 
Design-Bid-Build 


Texas 
Design-Bid-Build 


Florida 
CM At Risk 11 


Average Cost Growth 


24.08% 


2.53% 


-1.08% 


Average Time Growth 


43.26% 


2.58% 


-2.85% 


Cost per Square Foot 12 


$202.00 


$114.18 


$91.05 



Texas, like Massachusetts, relies on the design-bid-build delivery process for its building 
construction projects; but it has no filed sub-bid requirement. Massachusetts' ten-fold cost 
growth and seventeen-fold time growth over Texas, indicate the debilitating impact of the filed 
sub-bid statute on project performance. As cost and time growth are relative measures from 
contract signing to project completion, the different performance outcomes cannot be attributed to 
wage levels, benefits, or even differences in environmental laws. The outcome is in line with 
research suggesting that the filed sub-bid law creates an adversarial contractual atmosphere, 
causing delays which undermine the ability to deal with disputes in a cost- and time-effective 
manner. 

Florida differs from Massachusetts in that it is both free from the filed sub-bid constraint and free 
to employ alternative construction methods. As a result, Florida's relative cost and time 
measures are both negative, meaning that projects came in under budget and ahead of schedule. 

Additional research findings 

♦ A study conducted in 1998 concludes that, "projects administered using design/build project 
delivery can achieve significantly improved cost and schedule advantages." This study 
compares cost, schedule, and quality performance of 351 public and private U.S construction 
projects using alternative methods to projects using design-bid-build, and the performance of 
332 U.K. projects using alternative methods (see chart below). The results show that the 
United States can essentially complete a three-year project in two years using design-build. 





Design/Build vs. Design- 
Bid-Build in U.S. 


Design/Build vs. Design- 
Bid-Build in UK 


CM-at-Risk vs. Design- 
Bid-Build in U.S. 


Unit Cost 


6% Less 


13% Less 


1.5% Less 


Delivery 
Speed 


33% Faster 


30% Faster 


13% Faster 



9 Current public construction law requires the procurement of two different designers for each public construction 
project. One designer is selected to complete the feasibility study, and another designer is selected to complete the final 
design. 

10 Currently, state agencies and municipalities are required to file sub-bids for projects over $25,000. This means that 
the designer must divide every building contract above this threshold into the 17 sub-trades classified by law, and 
publicly advertised each piece before the general contractor is selected. 

u The data is from Lee County's experience with Construction Manager- At- Risk. 

^Cost per square foot figures are normalized. 

lj Konchar, Mark and Victor Sanvido. "The Comparison of U.S. Project Delivery Methods." Journal of Construction 

Engineering and Management . November/December 1998. 4 




Executive Office for Administration and Finance 



Policy Brief Series 

No. 7. March 23. 2000 



Another recent study 14 comparing project data from several states noted that the selection of a 
lowest bidder has several shortcomings, in that this method does not always offer the best 
value for the taxpayer's dollars. Lowest bid, for example, increases the likelihood of change 
orders. More importantly, this method does not consider the time sensitivity of a project, or 
the contractor's qualifications, allowing poor contractors to be repeatedly awarded projects. 
The study further examines effective alternatives to the procurement process in 
Massachusetts, such as a qualifications-based selection, a price and time-based selection (A+ 
B bidding), or a selection based on a contractor's past performance or track records. The 
paper concludes that overall the transportation departments in Indiana and Florida save 
money and time by using A + B bidding. This is contrasted with the Massachusetts Highway 
Department 15 , which experiences an average cost growth of 4.5%, and average time growth 
of 68% (see chart below). MassHighway could be more successful in containing cost, and 
delivering critical projects on time, if it were allowed to use the A + B procurement method 
which accounts for the price of time (e.g. traffic, lane closure, revenue loss). 





MassHighway 
Design-Bid-Build 


Indiana 
A + B Bidding 


Florida 
A + B Bidding 


Average Cost Growth 


4.5% 


-21.4% 


N/A 


Average Time Growth 


68% 


-33.4% 


-16-4% 



Federal Government 

In 1999, the federal government through the General Services Administration (GSA) spent $29 
million on the construction and renovation of federal government buildings in New England. The 
rules for construction procurement and delivery methods are governed by the Federal Acquisition 
Regulations (FAR). These rules were revised several years ago to allow more flexible 
procurement and delivery methods, selected on a project by project basis, that offer the "best 
value" to taxpayers (the best quality at a reasonable cost). The General Services Administration 
introduced design/build in the early 1990s. Today, many federal government agencies 16 are using 
design/build. Although skeptical at first, project managers in these federal agencies have 
admitted that there are fewer hassles, lower cost, greater speed, and better quality in design/build 
projects compared to using design-bid-build. 17 

Alternative Construction Methods in Massachusetts 

Currently, Massachusetts state agencies can use alternative construction methods such as 
design/build only through special legislation. Recent approvals of such legislation include the 
Route 3 North legislation (design/build/operate/transfer) and the courthouse bond bill 
(design/build). Unfortunately, legislative approval may offset any time savings associated with a 
project, given the vast number of filed bills that await legislative approval. There have been 
several successful alternative construction projects in Massachusetts, including the Suffolk 
County Jail, the Reggie Lewis Track, the Maximum Security Correctional Institute in Shirley, and 
the Massachusetts Information Technology Center in Chelsea, which have saved the 



I4 Runde, Dan and Yutaka Sunayama. "Innovative Contractor Selection Methods: Alternatives to the Traditional Low 
Bid in Massachusetts Public Construction", John F. Kennedy School of Government, April 6,1999. 

15 Massachusetts Highway Department is not subject to the two-step study design and is not required to file sub-bids, 
which can add to cost growth. 

16 Including the State Department, the U.S. Department of Veteran's Affairs, Federal Bureau of Prisons, the Army 
Corps of Engineers, the U.S. Navy, the U.S. Air Force, the Environmental Protection Agency, the Federal Highway 
Administration, and the U.S. Postal Service 

17 Silver S., Elaine. "Shaken Sensibilities Force Creativity," Design-Build . June 1999. 




Executive Office for Administration and Finance 



Commonwealth 6 months to 1 year in construction time. Time savings are important, because 
there are significant costs and revenue losses from delays in construction or renovations. 



Financial impact of construction delays 



.18 



Time is money. Annual construction costs escalate by approximately 2-5% each year . The 
Massachusetts legislature recognized the economic benefits of an expedited construction process 
in enacting the convention center legislation (Chapter 152, Acts of 1997). This legislation 
authorized the Convention Center Authority to use an alternative construction method: 
construction manager-at-risk. 

Convention Center: In full operation, the Boston Convention Center has the potential to generate 
$764.6 million/year in direct and indirect spending by convention delegates, exhibitors, and 
visitors. The Convention Center is also expected to create over 10,000 jobs in the 
Commonwealth. By using the construction manager-at-risk method, the state is likely to benefit 
from these enormous economic impacts sooner than if the project were constructed under the 
traditional method. 

The following are some examples of projects that are more typical in scale where the state would 
save money by using expedited construction processes: 

Dorm Opening: In a typical new 300 bed residential hall at a state college financed by the 
Massachusetts State College Building Authority, $1.2 million in gross revenue per year would be 
lost from a delay in the opening of a new college dorm in the public system. In addition, 300 
admitted students would be unable to live in campus housing for that year. The college also faces 
the financial risk to pay the $1 million owed in debt service for the dorm's construction, which 
would have been paid through the dorm's rent revenue. 

Sal tons tall State Office Building: The state will incur $15 million/year in lease space expenses 
while the Leverett Saltonstall Building remains closed. If legislation were enacted to allow 
alternative construction procurement and delivery methods to renovate the building, the state 
would save money with an expedited construction process. 

Additional reforms proposed in H. 4288 

Collapse of two-step design process 

Current public construction law requires the procurement of two different designers for each 
public construction project. One designer is selected to complete the feasibility study, and another 
designer is selected to complete the final design. This current system is inefficient because it 
adds as much as a year to the length of a single project, and decreases the policy/decision-making 
continuity on the design of the project, and the accountability of the architect on record. The 
construction reform legislation proposes to collapse the current two-step design process into one 
single designer with required independent value-engineering consultation at the conceptual design 
stage for all projects, and again at the schematic design stage for projects valued at more than $10 
million. 



18 

Engineering News-Record. December, 1999. (www.enr.com/cost ) 




Executive Office for Administration and Finance Policy Brief Series 

No. 7. March 23. 2000 



Update current dollar thresholds to reflect current business conditions 

The thresholds for public construction bidding have not been changed for almost two decades. 
Currently, state agencies and municipalities are required to file sub-bids for projects over 
$25,000. This means that the designer must divide every building contract above this threshold 
into the 17 sub-trades classified by law, and publicly advertise each piece before the general 
contractor is selected. Two weeks later, the general contractor that submits the lowest cost for the 
project is selected. In order to submit the lowest bid, general contractors have little choice but to 
assemble their bid by using the low-bid subcontractor from each trade without regard to the 
subcontractors' reliability, or quality of work. In addition, current law limits the general 
contractor's ability to enforce the time schedule and resolve conflicts between sub-bidders. The 
general contractor's lack of control and coordination over the sub-bidders contributes to 
adversarial relationships, creating project delays. 

The construction reform legislation proposes to increase the public building construction 
threshold subject to Chapter 149 to $250,000, in accordance with increased costs of construction. 
Increasing this threshold will allow state agencies and municipalities to complete small projects 
(under $250,000) without filing bids for subcontractors. Subcontractors, however, would not be 
eliminated from the construction process. General contractors will still to need hire the specified 
trade expertise of subcontractors to complete any building project. The change would therefore, 
allow general contractors to form their own teams, increasing accountability and minimizing 
delays. 

Small businesses would also benefit from this change, since state certification and bond capacity 
would not be required for projects under $250,000, allowing small businesses to compete more 
freely and more frequently. 

Contractor evaluations 

The Division of Capital Asset Management and Maintenance relies on contractor evaluations in 
determining the certification of contractors, yet very few are filled out upon project completion. 
As a result, only a small percentage of poor contractors are de-certified each year by DCAMM. 
Of all applications for certification, less than 5% are rejected each year. Thus, poorly qualified 
contractors continue to bid on public construction projects. To ensure that qualified contractors 
bid on public work and poor contractors are screened out, contractor evaluations must be 
completed. To encourage the completion of more contractor evaluations, the proposed legislation 
would indemnify architects, engineers or public employees that fill out honest evaluation from 
personal financial loss and expenses. 

Administrative Reforms 

In addition to identifying needed changes to the existing laws, the Construction Reform Task 
Force has reviewed and taken measures to change the existing administrative practices across 
state agencies, in order to improve the efficiency and customer service of the public construction 
process. 




Executive Office for Administration and Finance Policy Brief Serie 

No. 7. March 23. 200C 



Technology 

• A Construction web site has been created (www, state.ma.us/construction ), which runs in 
conjunction with Comm-PASS, the state on-line procurement and solicitation system. Since 
it was established in November 1998, the site has received over 17,000 hits. The site has 
incorporated "how to" manuals from the large construction agencies for contractors doing 
business for the first time, outlining bidding, payment process, change order procedures, 
information on minority and women-owned businesses, etc. In addition, the site provides a 
library reference of construction-related laws, and regulations, as well as relevant forms (i.e. 
evaluation forms, prequalification applications, etc.) Direct links to construction and 
procurement agencies' home pages are also included. 

• As of January 1999, designers must submit all design blueprints for DCAMM projects on 
compact discs. Designers and contractors must also submit detailed critical path schedules to 
DCAMM in electronic format, saving time and paper. 

• In October 1999, the Department of Housing and Community Development began piloting a 
project specific web site for construction. This new technology facilitates communication 
among team members, reduces the cost of expensive administrative procedures (i.e. faxes, 
overnight deliveries, etc), and ultimately saves time on design and construction. 

• Next steps include creating centralized web-based applications that tie in with the central 
business registry and departmental databases so that the awarding authorities can share 
contractor information online. 

Training 

• The Inspector General's Office has teamed up with the construction staff from state agencies 
to launch a professional development curriculum for public sector construction staff. The 
first course began in January, 2000. This four day introductory course serves as one of two 
prerequisites for a series of six courses that will result in the designation of "Certified Design 
and Construction Professional." 



MASSACHUSETTS CERTIFIED DESIGN AND CONSTRUCTION PROFESSIONAL 

Proposed Course Curriculum: 


Course Requirement 


Course Number 


• Construction Management 

• Design Management for Building/Public Works projects 

• Field Construction Operations for Building/Public Works projects 

• Facility Management for Building/Public Works projects 

• Facility Repair for Building/Public Works projects 

• Computer Technology 


CM 100 
CM 200/201 
CM 300/301 
CM 400/401 
CM 500/501 
CM 600 



• DCAMM hosted its first-ever training seminar for cities and towns on the benefits of 
construction management in January, 2000. The seminar included presentations from 
construction managers and local officials. The seminar may be repeated in this summer as 
one of the Massachusetts Municipal Association's course offerings. 



A partnering awareness training was held in March 1999 for over 70 employees from six 
agencies and the Associated General Contractors. Another training session on negotiation 
and facilitation will be held by Fall, 2000 for state agency construction project managers. 




Executive Office for Administration and Finance 



Payment Process 

Prior to the Construction Reform Task Force's review, the Commonwealth paid less than half of 
its construction bills on time. After a year of focused efforts in eight state agencies, the state is 
paying over 70% of its construction payments on time. This progress is a result of agencies 
institutionalizing reforms, such as eliminating several layers of review, simplifying procedures 
between field and central offices, and resolving issues with contractors before a bill is submitted. 
Improvements are continuing to be made. 



Commonwealth of Massachusetts 
Construction Payments (made within 30 days) 




2nd O • FY '99 



3rd O - FY99 



4th Q • FV99 



1 »t Q - FY00 



2nd O- FYOO 



Partnering 



The Commonwealth has recently adopted partnering in several of its agencies, changing the way 
it does construction business. Partnering is a way of conducting business in which two or more 
organizations make long-term commitments to achieve mutual goals. 19 Other states, such as 
Texas, have experienced less cost and time growth from partnered construction projects. 
Partnering is an alternative construction method that does not require special legislation. 



The Massachusetts Highway Department is partnering 33 new projects, in addition to the 40 
partnered projects already underway. MassHighway now has a partnering coordinator in each of 
their five district offices, and is also developing a toolkit (standard forms, etc.) to supplement 
their partnering handbook. Other agencies have also adopted partnering. The Division of Capital 
Asset Management and Maintenance began partnering its first formal job, the UMASS Lowell 
Student Center this winter. The Department of Housing and Community Development issues a 
letter promoting partnering among the state, local housing authority, and the general contractor 
for each project. 



19 Commonwealth of Massachusetts Partnering Manual 



9 




Executive Office for Administration and Finance 



Construction Contracts 



The Commonwealth Construction Committee is in the process of finalizing standard building and 
road construction contract boilerplates for small and large construction projects that will be issued 
to all state agencies doing construction work. In January 2000, the Division of Capital Asset 
Management and Maintenance began using the newly revised building construction contract for 
projects under Chapter 149, which will be issued statewide in the Spring, 2000. A new standard 
contract has also been developed (currently under review) for smaller building construction 
projects under Chapter 30, Section 39M. MassHighway has revised and standardized its road 
construction contract, which will also be issued in the Spring, 2000. 

Each contract has been simplified and streamlined by incorporating certain items by reference to 
statute, regulations or guidelines where feasible or to the extent that it results in a more user- 
friendly document. Certain provisions that are common in all construction contracts have been 
standardized, including alternative dispute resolution language, and the option to use electronic 
funds transfer. Each building contract boilerplate will include standardized tabs used in the 
horizontal contract, achieving uniform organization and facilitating contract review and 
identification of key elements. Finally, training on the use of the new contracts will be provided 
to agency staff when the contracts are finalized and issued for statewide use. This standardization 
should reduce the overhead costs of contract administration. Since 64% of state construction 
contracts are relatively small ($100,000 to $500,000), accounting for only 7% of the total 
construction contract dollars, the benefits of standardizing such contracts should be substantial. 



80% 
70% 
60% - 
50% 
40% 
30% 
20% - 
10% - 
0% 



Percentage of Contracts vs. Percentage of Dollars Expended 



1% of Active Contracts >$100,000 D% of Active Contract Expended >$100,000 




64% of FY 1999 active contracts 
>S100.000 involved only 11% of 
FY 1999 spending 



16% 



3% of FY 1999 active contracts 
>$100,000 involved65% of 
FY 1999 spending 



7% 

iilHiii 




$100,000 to 500,000 



$500,000 to 1,000,000 $1,000,000 to 10,000,000 

Contract Dollar Value 



>$10,000,000 



Design Forms 

The Designer Application Form has been revised, consistent with federal forms, making it 
simpler for firms to do business with the state. 

Conclusion 

The administration of public sector construction contracts is based on laws that originated over 50 
years ago. It is time that the Commonwealth incorporate advances in the construction industry's 
practices and technology into state process. Such advances are common practice in other states 
and at the federal level. The executive branch has begun to change its processes. However, these 
changes will be greatly enhanced by the enactment of the Construction Reform legislation. 



10